The agency underscored Prime Minister Viktor Orban's "unorthodox, and possibly unsustainable, economic policies," which were affecting growth by discouraging investment, which in turn could impact efforts to reduce government debt.

Among the measures that S&P criticised were tax hikes and levies on the banking, telecommunications and energy sectors.

On Wednesday, Hungary said it would do away with controversial "crisis taxes" on the retail and telecommunications sectors from January 2013, after the European Union (EU) called for them to be scrapped.

The special levies were "discriminatory" as they disproportionately affect non-Hungarian operators, Brussels said.

However, a revenue-based tax levied by Hungary on the banking sector and also introduced as a temporary "crisis tax," was made permanent at its 2013 level as part of a package of fiscal adjustment measures announced by the economy ministry a week ago.

The austerity package, which also increased taxes on energy companies, was the third in six weeks, as Budapest tries to keep its budget deficit under 3.0 percent of the nation's output to avoid losing access to vital EU cohesion funds.

According to the European Commission's autumn economic forecasts released earlier this month, Hungary's public deficit will reach 2.5 percent of gross domestic product in 2012, 2.9 percent of GDP in 2013, and 3.5 percent in 2014.